UK property market 'subdued' with falling house prices

FOLLOWING on from a report earlier this week by mortgage lender the Halifax that the average house price dropped last month comes further evidence today from the Royal Institution of Chartered Surveyors (RICS) that the UK property market over the last few weeks has become more subdued.

The property market slowed in April, in London, the South East and South West

The report, released this morning, contains the results of the monthly questionnaire issued by RICS to its members and indicates that the market slowed in April, not just in London and the South East as was the case previously, but now in other parts of the country such as the South West, which has seen property prices fall on average for the first time since May 2013.

However, other parts of the UK, such as Northern Ireland and Scotland, are seeing values continue to rise.

In the longer term, Surveyors are more optimistic and suggest that prices will recover and increase over the next year, although some in London suggest that the current negative sentiment will result in a further decline in property values over the next twelve months.

That said, there would appear to be rising concern at the middle-tier of the market, where homes priced between £500,000 and £1m are increasingly failing to make their asking price.

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This is, of course, very much a relative issue as in some parts of the UK £500,000 buys a mansion whilst in other areas, such as London and the South East, it would struggle to cover the cost of a modest three-bedroom home.

However, for families who have to reside within commuting distance of London it does somewhat highlight that values have reached the point where trading up the ladder is becoming increasingly difficult and has ‘topped out’ at current levels.

The silver lining to the report is that Surveyors across the UK suggest that overall activity levels remained static in April, which whilst on the face of it wouldn’t appear to be great news, it is positive as it suggests a reversal of the decline in buyer activity in some areas which had been reported previously, with Wales, Yorks and Humberside, Scotland and Northern Ireland all seeing spikes in buyer activity last month.

There is, however, still a near record low level of homes available for sale on the market across the UK, a situation that didn’t seem to improve last month even though April is normally considered one of the busier times for the property market.

Simon Rubinsohn, RICS Chief Economist commented on the report, “The housing market typically tends to see a pick-up in activity at around this time of the year and the feedback from respondents to the latest survey does seem to be capturing this tone.

“However, once this seasonal pattern has been allowed for the underlying trend in transactions still remains broadly flat.”

Brian Murphy, Head of Lending for Mortgage Advice Bureau also observed, "Following on from reports earlier this week that the average house price had dropped last month, it’s not a huge surprise to find that the opinion amongst RICS members points to the market cooling in April, not just in areas that were already seeing values recede, such as London and the South East, but in the South West which previously had seen significant increases.

"Whether this is, understandably, the outcome of Surveyors who are operating on a far more circumspect basis in areas where prices have risen quickly over the last few months potentially leading to down-valuations isn’t specifically mentioned in this latest report but might perhaps be a contributing factor.”

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With estate agents and surveyors up and down the country suggesting that a lack of buyer choice is causing much longer transaction times, due to the fact that those who do want to move are taking longer to find a property to purchase as there is so little choice available, it seems that many in the industry are somewhat pining their hopes on a late ‘Spring surge’ in order to kick-start reporting a stagnating market.

As Chris Charlton, a Surveyor for Savills in Nottingham observed, “The pre-Easter market has been slow to gather pace but good levels of new instructions and new applicants bode well for the next few months.”

In Guildford, prime commuter-belt territory of Surrey, Tony Jamieson of Clarke Gammon Welers agreed that there is a more positive outlook ahead and said, “There is at least a bit more optimism in the market, with a bit more stock becoming available and more viewings being undertaken.

“However, there is still an oversupply of brand new two bed flats in town centre which is adversely affecting prices.”

His sentiments weren’t shared by all of his colleagues though, as John Haigh of Lister Haigh in Knaresborough commented, “Uncertainty in the Government and the Economy. A rapidly increasing supply of new build houses. It’s a worry.”

Likewise in Dorset, which has up until recently seen significant price rises, the market slow-down was also apparent with fellow RICS member Graham Thorne reporting that April was, “A difficult month with worries about Brexit further stalling vendors aspirations.”

With a slower than expected economy suggesting that the previously anticipated interest rate increase won’t be announced later today by the Bank of England, the fact that buyers are still out there wanting to purchase at all is a key mark of consumer confidence.

Even though the outlook for both property values and numbers of transactions may be flat for the next few months, all things considered that in itself is probably not the worst outcome possible.